Commentary

First Take

Nuclear reaction

Commentary: Breaking through a financial impasse

SAN FRANCISCO (MarketWatch) -- The Obama Administration, bogged down on so many fronts, has tossed $8.3 billion of federally backed loans to the nation's nuclear power industry.

The money is supposed to grease the skids of an industry that has, for many reasons, been dormant for more than a generation. But it's also an effort to make good on at least one campaign promise to make nuclear power a key part of the nation's energy policy.

Proponents of nuclear power hail this as a great step forward. To them, the nation has at last overcome the nightmares of Three Mile Island and Chernobyl. Finally, the industry is entering a Renaissance Age, with plentiful, safe and clean power just around the corner.

There's nothing terribly wrong with that view, except that it's essentially the same song they've been singing for decades with so far nothing to show for it. See story on nuclear industry troubles.

There's a reason the government had to step in to get this industry over the hump. Despite plenty of plans for new reactors, extensive engineering plans, site studies and safety reports, it's been nearly impossible for the industry to secure the guarantees needed to finance new reactors.

Those who anchor their beliefs entirely in free-market economics might see a message here. Those who believe there's a time and place for government intervention will understandably have a different take on it. Regardless, there are themes underlying this industry that neither side can ignore, and one of the biggest remains cost.

While the industry hasn't had a calamitous safety breach since Chernobyl blew up in 1986, it is still under a financial cloud. Most of the 100-plus reactors still in operation in the United States were huge budget-busters and the industry as a whole failed miserably to fulfill the promise of free electricity made by its earliest backers at the dawn of the Atomic Age.

Meanwhile, the permitting process has grown stricter, not easier, and while the public appears to be growing more comfortable with nuclear power, most will still fight hard to keep plants out of their neighborhood.

All that spells insufferably long lead times on projects that will take another generation to pay off. No wonder capital markets have shunned the industry.

Bankers looking for far quicker, easier returns have little appetite for heavily regulated projects with completion times akin to the pyramids. This has erected a barrier around the industry that's proving as impenetrable as safety concerns.

Which is why the government is stepping in. But knowing whether it was a step that made sense economically easily could take another 30 years.

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